Editore"s Note
Tilting at Windmills

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August 5, 2010

A REMINDER ABOUT 'REAGANOMICS'.... The conservative Washington Times ran a column yesterday insisting that Reagan's economic policies succeeded where Obama's have not. Cato's Dan Mitchell, ostensibly an expert in tax policy, found the comparison compelling.

"Both Ronald Reagan and Barack Obama entered office during periods of economic misery," Mitchell said. "But they adopted dramatically different solutions. Reagan reduced the burden of government and Obama increased the burden of government... As you can see, Reaganomics is much better than Obamanomics." Mitchell added that this is a "slam-dunk comparison."

This seems pretty silly, for more than a few reasons. Ezra Klein noted, for example, that it's misguided to compare the downturn of the early 1980s and the global financial crisis in recent years. "If you want to compare Reagan to someone, you should look at Clinton, who also entered office amidst a traditional recession. But Reagan doesn't look too good in that match-up," Ezra added.

Paul Krugman noted that the GOP argument itself is a reminder why he "can't maintain the pretense that we're having any kind of intelligent, or remotely honest, discussion" with conservatives.

reagantaxes.png

I agree with all of this, but wanted to add something. Krugman posted this chart several months ago, and it continues to seem relevant to the discussion. Reagan's first big tax cut was signed in August 1981. Over the next year or so, unemployment went from just over 7% to just under 11%. In September 1982, Reagan raised taxes, and unemployment fell soon after.

We're all aware, of course, of the correlation/causation dynamic, but as Krugman noted in January, "[U]nemployment, which had been stable until Reagan cut taxes, soared during the 15 months that followed the tax cut; it didn't start falling until Reagan backtracked and raised taxes."

John Boehner wasn't in Congress at the time, but as Reagan's post-tax-cut unemployment rate soared to nearly 11%, I wonder whether the Orange One would have been on television every day asking, "Where. Are. The. Jobs?"

The right is convinced that Obama's recovery efforts didn't work, and as proof, they point to the unemployment numbers a year and a half after the policy became law. But if that's the appropriate measure, wouldn't Republicans also have to believe that Reagan's 1981 tax-cut package also failed, since unemployment went even higher the year after it passed?

Steve Benen 10:15 AM Permalink | Trackbacks | Comments (19)

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There you go again, Steve.

Facts just get in the way of Boehner's narrative.

He's probably still pissed about the tanning bed tax.

Posted by: jcricket on August 5, 2010 at 10:18 AM | PERMALINK

Admittedly, much of this discussion is too wonky for me, but here's what I can understand: When Boehner asks, "Where.Are.The.Jobs?", my question to him and all the other poutraged Republicans is, "Where were your votes FOR the jobs? Where ARE your votes FOR the jobs?"

If ever circumstances bring mind the guy who offs his parents and then asks the judge for mercy because he's now an orphan, it's Republicans screeching "Where are the jobs" as they steadily vote against any and all legislation to create jobs.

Posted by: June on August 5, 2010 at 10:21 AM | PERMALINK

Both Ronald Reagan and Barack Obama entered office during periods of economic misery," Mitchell said.

Ah, no.

Reagan inherited a GDP of +7.6% in the 4TH QTR of 1980 and a GDP of +8.6% in the 1ST QTR of 1981.

Obama inherited a GDP of -6.8% in the 4TH QTR of 2008 and a GDP of -4.9% in the 1ST QTR of 2009.

Posted by: Joe Friday on August 5, 2010 at 10:24 AM | PERMALINK

All that said I would still like a simple, clear (unhampered by political talking points and spin) answer to this: WHY has not more of the recovery money gone to actual infrastructure needs and programs that would creat needed jobs and do the work of restoring important elements of our country????? Not to mention things like high speed rail projects...YEGODS...time for SOMETHING constructive to happen on a larger scale...

Posted by: Dancer on August 5, 2010 at 10:32 AM | PERMALINK

And of course these insane Repiglicans always want to forget that Reagan increased the national debt, in total, than all OTHER PRESIDENTS COMBINED.

Posted by: stormskies on August 5, 2010 at 10:41 AM | PERMALINK

Of course, the other thing that Reagan did at the same time as the tax cut was to cut a huge swath of social services. Negative stimulus. (And also exactly what the GOP says we should do again.)

Posted by: paul on August 5, 2010 at 10:41 AM | PERMALINK

[hitting head on wall].

Steve, again, you write as if the GOP arguments are supposed to be internally consistent. They're not. they're just talking points to get the public to go along with their desired result.

They've obviously gotten in your head.

Their "arguments" are not to be taken as a debating position. "They're just saying stuff".

If the Dems would stop trying to act as is this were a debate over tea and crumpets and just relentessly explain their positions, things would be better.

Posted by: Observer on August 5, 2010 at 10:44 AM | PERMALINK

The right is convinced that Obama's recovery efforts didn't work, and as proof, they point to the unemployment numbers a year and a half after the policy became law. But if that's the appropriate measure, wouldn't Republicans also have to believe that Reagan's 1981 tax-cut package also failed, since unemployment went even higher the year after it passed?

I think you are missing a big point here. It isn't that unemployment went up under both scenarios, the point is Obama came into office with unemployment figures rising faster than a Saturn rocket sending Apollo astronauts to the moon. Reagan came into office with a fairly stable unemployment situation. Both enacted drastic policies to deal with a bad economy and in Reagan's case things got demonstrably worse over the first year and half of those policies and in Obama's case things started to level off and if they didn't get demonstably better they sure as hell didn't get demonstrably worse during that first year and a half. Big difference. BIG DIFFERENCE.

Posted by: majun on August 5, 2010 at 10:56 AM | PERMALINK

While knowing precious little about economics, there has been a thought scurrying about in the back of my mind every time I read the employment-taxation figures such as those mentioned here. Does the business community in some visceral way take a tax cut to mean "something is dreadfully wrong; let's cut back"? Not as a reasoned response but as a gut reaction, an economic fight or flight response. Of course it could just be that they want more money and chiseling it off lower rung employees salaries works too. As I say, I am not well versed in economics but the little I have studied strikes me a gibberish cubed.

Posted by: gelfling545 on August 5, 2010 at 11:02 AM | PERMALINK

It's one thing for dicks like boner(r) to lie about economic issues and quite another for real economists to write total lies and bullshit for their employers to promote a "favorable to the right" position.
I'm reminded of an online game my young grandson plays on the Wallace and Gromit site of a dog herding sheep. The right just barks like the dog and frightens and steers the sheep into the pen.

Posted by: reduced on August 5, 2010 at 11:27 AM | PERMALINK

Dancer - the answer is in four words: Olympia Snowe and Susanne Collins. MANY REAL econ geeks advocated for MORE infrastructure - like $300 b more, or so, at least. The very liberal American Society of Civil Engineers reckons that we need to spend 1.6 - 2 trillion over 5 yrs infrastructure needs - liberal things like water lines, sewer lines, bridges, roads, rail lines, you know, wussie things.

A starting program of 200-300 bn/year for 3-5 yrs would really have helped. However, recall that the stimulus bil had to be scaled back to fall below $900 bn total, and there was a large fraction consumed by tax credits, etc; much of this was done to make the Mainers happy. Then there was a lot of backfilling aid to the states, etc etc etc.

A real discussion at the time, which might have included at least a few repubs., might have yielded better, longer term, infrastructure spending, and a discussion of how to pay for this - long term. But that was when the R's decided to stop any real discussion of governing.

Posted by: bigtuna on August 5, 2010 at 11:29 AM | PERMALINK

I suspect that what the graph shows is partially cause and effect. Interest rates fell significantly about the time that the 1982 tax increases were passed, which makes sense given that the increases represented a commitment by the government to limit government borrowing. It makes sense that the lower interest rates would in turn contribute to the turn around in unemployment.

Posted by: Kenneth Almquist on August 5, 2010 at 11:57 AM | PERMALINK

By my count, the entire package of the Bush tax cuts were made by 2003. The time line for me then is a 5 year stretch to study the effects of said cuts.

Oh, what happened in late August 2008?

More federal revenue generated by tax cuts? NO!

More jobs created by tax cut reaping firms? NO!

More economic equity produced within our GDP? NO!

A catastrophic economic meltdown aided by tax-cut drunken reckless corporate behavior fueled by a disdain toward governmental regulation and abetted by over all Bush domestic policy?

Oh, I think the nail has been driven in very well with this one! What say ye o'apologists for such madness? -Kevo

Posted by: kevo on August 5, 2010 at 12:09 PM | PERMALINK

at this point, the continued belief in voodoo economics isn't belief in economics, it's belief in voodoo

Posted by: dj spellchecka on August 5, 2010 at 12:31 PM | PERMALINK

"The right is convinced that Obama's recovery efforts didn't work, and as proof, they point to the unemployment numbers a year and a half after the policy became law."

No, the right is convinced that bashing Obama's recovery efforts is a political lifejacket to cling to. As for their "proof," it's as ridiculous as everything else they say.

Posted by: Cazart on August 5, 2010 at 1:20 PM | PERMALINK

The stimulus bill included $288 Billion in tax cuts \credits. I notice Republicans never seem to mention that in their comparisons.

I guess conservative tax cuts are better than liberal tax cuts.

Posted by: Stephen on August 5, 2010 at 2:34 PM | PERMALINK

"I guess conservative tax cuts are better than liberal tax cuts."

BINGO. Conservative tax cuts go to the rich who use them to "create jobs." Democratic tax cuts go to the poo (i.e. African Americans) who spend the money on malt liquor and cuban cigans. QED.

The fact that any reasonable economic analysis would indicate that the opposite is true (tax cuts for the rich leak out to the benefit of economies other than the U.S.) is irrelevant. Because its not about economics. Its about race, even and always.

Posted by: gordbrown on August 5, 2010 at 3:06 PM | PERMALINK

People still read the Washington Times? Isn't it owned by the new self-proclaimed Jesus? Pathetic think tank (can't get a job anywhere else) rag. Always wrong...on everything. To them George Will is an expert on Climate Change.

Posted by: bjobotts on August 5, 2010 at 7:04 PM | PERMALINK

FACTS:
Reagan ... Taxes Up = Economy Up
Clinton ... Taxes Up = Economy Up
Bush II ... Taxes Down = After a while Economy Free Falls Off Cliff

QUESTION:
Why?

CORRELATION:
Tax cuts for the Rich = Lazy Rich People.
Tax increases on the Rich = Industrious, Innovative Rich People.

CONCLUSION:
Rich People like being Rich!
Rich People will do what is necessary to maintain, or even exceed their previous Richness.

SOLUTION:
Make them less Rich. Preferably much less Rich!
Tax rate reminder borrowed from Robert Reich's 'debate starter' of 8/2/10; "How about restoring the top rate to where it was under John F. Kennedy (76 percent), or under Dwight Eisenhower (91 percent)?"

COMMENT:
And don't get me started on the glaring Depression era lead-up parallels in the income disparity between our Richest country members and the rest of US.

Posted by: BobbydInPA on August 6, 2010 at 11:49 AM | PERMALINK




 

 

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